Does Peoples Bancorp of North Carolina (NASDAQ:PEBK) Deserve A Spot On Your Watchlist?
It’s common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well-funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
So if this idea of high risk and high reward doesn’t suit, you might be more interested in profitable, growing companies, like Peoples Bancorp of North Carolina (NASDAQ:PEBK). While this doesn’t necessarily speak to whether it’s undervalued, the profitability of the business is enough to warrant some appreciation – especially if it’s growing.
The market is a voting machine in the short term, but a weighing machine in the long term, so you’d expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Over the last three years, Peoples Bancorp of North Carolina has grown EPS by 11% per year. That’s a pretty good rate, if the company can sustain it.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it’s a great way for a company to maintain a competitive advantage in the market. Our analysis has highlighted that Peoples Bancorp of North Carolina’s revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Peoples Bancorp of North Carolina achieved similar EBIT margins to last year, revenue grew by a solid 4.5% to US$77m. That’s encouraging news for the company!
Peoples Bancorp of North Carolina isn’t a huge company, given its market capitalisation of US$164m. That makes it extra important to check on its balance sheet strength.
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own Peoples Bancorp of North Carolina shares worth a considerable sum. To be specific, they have US$25m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 15% of the company; visible skin in the game.
It’s good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations between US$100m and US$400m, like Peoples Bancorp of North Carolina, the median CEO pay is around US$1.5m.
The Peoples Bancorp of North Carolina CEO received total compensation of just US$636k in the year to December 2022. That looks like a modest pay packet and may hint at a certain respect for the interests of shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when it’s reasonable, that gives a little more confidence that leadership is looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
One positive for Peoples Bancorp of North Carolina is that it is growing EPS. That’s nice to see. Earnings growth might be the main attraction for Peoples Bancorp of North Carolina, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, you’d argue this one is worthy of the watchlist, at least. Even so, be aware that Peoples Bancorp of North Carolina is showing 2 warning signs in our investment analysis, you should know about…
There’s always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies that have demonstrated growth backed by recent insider purchases.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
